FATÝH UNIVERSITY

FACULTY OF ECONOMIC AND ADMINISTRATIVE SCIENCES

DEPARTMENT OF MANAGEMENT & DEPARTMENT OF ECONOMICS

MAN 202 PRINCIPLES OF ACCOUNTING II

FINAL EXAM

Instructor: Ali COSKUN                                                                                                                    June 4, 2005

QUESTIONS

Question 1. The following income statement and selected balance sheet account data are available for Kelly Corporation, at December 31, 2004:

KELLY CORPORATION

Income Statement

For the Year Ended December 31, 2004

                Revenue:

                        Net sales.......................................................................................................                                       $3,244,000

                        Interest income............................................................................................                                              60,000

                        Gain on sales of marketable securities.....................................................                                                5,000

                                Total revenue and gains....................................................................                                       $3,309,000

                Costs and expenses:

                        Cost of goods sold.....................................................................................       $1,300,000

                        Operating expenses....................................................................................            760,000

                        Interest expense..........................................................................................            190,000

                        Income taxes................................................................................................           100,000

                                Total costs and expenses..................................................................                                       $2,350,000

                Net income...........................................................................................................                                       $   959,000

                                                                                                                                                           End of                 Beginning

Selected account balances:                                                                                                           Year                     of Year

Accounts payable (merchandise suppliers)...................................................................            450,000                   425,000                       

Accounts receivable..........................................................................................................          $325,000                 $300,000

Accrued income taxes payable.........................................................................................              23,000                     30,000                       

Accrued interest payable..................................................................................................              14,000                       9,000                       

Accrued interest receivable..............................................................................................                1,000                       5,000                       

Accrued operating expenses payable.............................................................................              80,000                     83,000                       

Inventories    …...................................................................................................................            610,000                   620,000

Short-term prepayments....................................................................................................              18,000                     12,000

1.       Dividend revenue is recognized on the cash basis.  All other income statement amounts are recognized on the accrual basis.

  1. Operating expenses include depreciation expense of $100,000.

Prepare a partial statement of cash flows, including only the operating activities section of the statement and using the direct method or indirect method.

 

Question 2.  During the current year, Junior Construction disposed of plant assets in the following transactions:

May 3     Junior sold land and a building for $700,000, receiving $100,000 cash and a 5-year, 12% note receivable for the remaining balance.  Junior’s records showed the following amounts: Land, $150,000; Buildings, $650,000; Accumulated Deprecation: Building (at the date of disposal), $200,000.

July 10    Junior traded in an old truck for a new one.  The old truck had cost $50,000, and its accumulated depreciation amounted to $38,000.  The list price of the new truck was $40,000, but Junior received a $10,000 trade-in allowance for the old truck and paid only $30,000 in cash.  Junior includes trucks in its Vehicles account.

Prepare journal entries to record each of the disposal transactions.  Assume that depreciation expense on each asset has been recorded up to the date of disposal.  Thus, you need not update the accumulated depreciation figures stated in the problem.

 

 

CHOOSE 3 (THREE) OF THE FOLLOWING QUESTIONS AND ANSWER

 

Question 3. An analysis of the income statement and the balance sheet accounts of FTP Company at December 31, 2002, provides the following information:

                Income statement items:

                        Loss on Sales of Plant Assets..................................................................................................           $ 10,000

                        Gain on Sales of Marketable Securities...................................................................................                9,000

                Analysis of balance sheet accounts:

                        Marketable Securities account:

                                Debit entries........................................................................................................................              68,000

                                Credit entries.......................................................................................................................              54,000

                        Notes Receivable account:

                                Debit entries........................................................................................................................              43,000

                                Credit entries.......................................................................................................................              49,000

                        Plant and Equipment accounts:

                                Debit entries to plant asset accounts..............................................................................            110,000

                                Credit entries to plan asset accounts..............................................................................            100,000

                                Debit entries to accumulated depreciation accounts....................................................              75,000

  1. Except as noted in 4, payments and proceeds relating to investing transactions were made in cash.
  2. The marketable securities are not cash equivalents.
  3. All notes receivable relate to cash loans made to borrowers, not to receivables from customers.
  4. Purchases of new equipment during the year were financed by paying $50,000 in cash and issuing a long-term note payable for the remaining balance.
  5. Debits to the accumulated depreciation accounts are made whenever depreciable plant assets are retired.  Thus the book value of plant assets sold or retired during the year was $25,000 ($100,000 – $75,000)

Prepare the investing activities section of a statement of cash flows. 

 

Question 4. Steven Jones organized Steven Corporation in January 1999.  The corporation immediately issued at $20 per share one-half of its 100,000 authorized shares of $2 par value common stock. On January 2, 2000, the corporation sold at par value the entire 20,000 authorized shares of 10%, $100 par value, cumulative preferred stock.  On January 2, 2001, the company again needed money and issued 10,000 shares of an authorized 20,000 shares of no-par, cumulative preferred stock for a total of $1,500,000.  The no-par shares have a stated dividend of $18 per share.

The company declared no dividends in 1999 and 2000.  At the end of 2000, its retained earnings were $900,000.  During 2001 and 2002 combined, the company earned a total of $1,500,000.  Dividends of $1 per share in 2001 and $5 per share in 2002 were paid on the common stock.

Prepare the stockholder’s equity section of the balance sheet at December 31, 2002.  Include a supporting schedule showing your computation of retained earrings at the balance sheet date. 

 

Question 5. Billboard, Inc., purchased a new machine on January 1, 2001, at a cost of $120,000.  The machine’s estimated useful life at the time of the purchase was 5 years, and its residual value was $20,000. Prepare a complete depreciation schedule, beginning with calendar year 2001, under 150% declining-balance methods.

 

Question 6. At December 31, 2001 Task Manufacturing Co. owned the following investments in the capital stock of publicly owned companies (all classified as available-for-sale securities):

                                                                                                                                                                   Current

                                                                                                                                             Cost          Market Value

Excel Computer, Inc. (1,500 shares: cost, $40 per share; market value, $60)   $ 60,000                  $ 90,000

Healthy Foods (6,000 shares: cost, $10 per share; market value, $9)                       60,000                54,000

                Totals                                                                                                             $120,000             $144,000

 

In 2002, Task Co. engaged in the following two transactions:

July   5 Sold 500 shares of its investment in Excel Computer at a price of $64 per share, less a brokerage commission of $250.

July 15 Sold 3,000 shares of its Healthy Foods stock at a price of $8 per share, less a brokerage commission of $150.

At December 31, 2002, the market values of these stocks were: Excel Computer, $50 per share; Healthy Foods, $8.50.

a.        Prepare journal entries to record the transactions on July 5 and July 15.

b.        Prior to making a mark-to-market adjustment at the end of 2002, determine the unadjusted balance in the Marketable Securities controlling account and the Unrealized Holding Gain (or Loss) on Investments. 

c.        Make the adjusting entry for the mark to market adjustment on December 31, 2002.